S&P Global And Fitch Ratings Reaffirm Malaysia’s Sovereign Credit Ratings, Stable Outlook

Malaysia’s sovereign credit ratings were reaffirmed by S&P Global Ratings (S&P) at A- and Fitch Ratings (Fitch) at BBB+, with both maintaining their “Stable” outlook. The affirmation by both agencies indicates international stakeholders’ continued confidence in the country’s robust and resilient growth, in spite of a challenging external environment and the escalation of geopolitical conflicts.

According to S&P, “Our ratings on Malaysia are underpinned by the country's strong external position and monetary policy flexibility. In addition, its economic growth rate trend is faster than sovereigns of similar income level.”

S&P highlighted that Malaysia is going to be a key beneficiary in the global semiconductor industry boom period, which will be powered by AI computing needs. S&P also believes that the sustained economic growth, alongside a savvy execution in reforming blanket subsidy programmes will be the key factor in improving Malaysia's public finances. Moreover, the current political stability has resulted in a more favourable policy-making environment, enabling economic reforms and fiscal consolidation to gain traction.

Fitch meanwhile expects Malaysia’s GDP growth to rebound to 4.4% in 2024 and 4.5% in 2025, up from 3.6% in 2023, on resilient domestic demand and investments in the manufacturing sector. Additionally, private consumption will benefit from favorable labour market conditions, cash assistance programmes and retirement fund withdrawals. Meanwhile, manufacturing output and exports are expected to grow with a recovery in external demand for electronics.

Fitch also anticipates Malaysia’s current account surplus to rise to 2.1% and 2.4% of GDP in 2024 and 2025 respectively. Malaysia is seen to benefit from the global supply chain diversification, as well as an increase in realised foreign investments in 2024.

Going Forward

“The reaffirmation of Malaysia’s sovereign credit ratings and positive economic outlook by S&P and Fitch is testament to the Government’s responsible economic management and how the Ekonomi MADANI reform agenda is delivering positive results,” said YAB Dato’ Seri Anwar Ibrahim, Prime Minister and Minister of Finance.

These include the continuous reforms across institutions to enhance ease of doing business and competitiveness, as well as the continuing progress of projects and policy reforms under the New Industrial Master Plan 2030, the National Energy Transition Roadmap, and the Mid-Term Review of the 12th Malaysia Plan.

“With a buoyant labour market and stronger trade and investment performance already pushing the first quarter 2024’s GDP growth beyond market expectations to 4.2%, the Government is confident that the full-year 2024’s economic growth will be within its official growth target range of 4% to 5%,” added YAB Dato’ Seri Anwar.

Moving forward, the Government is firmly committed to ensure public finance sustainability by adhering to a consistent fiscal consolidation trajectory. The tapered fiscal deficit of 5.0% in 2023 is expected to narrow further to 4.3% in 2024. In the medium term, the Government aims to achieve a budget deficit of 3% or less, as outlined in the Public Finance and Fiscal Responsibility Act 2023 which was enforced on 1 January 2024. This aligns with the fiscal target under the Ekonomi MADANI framework to achieve fiscal sustainability and enhancing governance.

Ministry of Finance
Putrajaya
28 June 2024